The Strategist

Three-quarters of British companies to relocate headquarters outside of the country

09/26/2016 - 14:54

According to a recent survey composed by KPMG, 76% of Heads of British companies intend to transfer headquarters of their business, or part of their companies’ activities from the UK to Europe in the near future. The uncertainty associated with Brexit apparently looks scary for business representatives even despite the fact that most of them are confident in the British economy’s growth.

According to KPMG’s study, 72% of general directors of British companies voted on June 23 against leaving the EU. In the end, however, their point of view turned out to be in the minority. Now, Heads of businesses located in the country are trying to find a way to adapt to future changes, and prepare for them in advance. Even despite the fact that the vast majority of them are confident in the growth of the British economy in the next year (so say 69% of respondents), three-quarters of UK companies may soon leave the UK.

76 out of 100 heads of companies with an annual turnover above £ 100 million stated that they intend to move headquarters of their companies, or some of their operations, from Britain to continental Europe. "Business leaders react to uncertainty by developing contingency plans, - commented Head of the British division of KPMG Simon Collins on the research. - More than half of them believe that ability of the United Kingdom to do business will be undermined after Brexit, so that many general directors find it important to ensure various scenarios for protection from failures in the future."

It’s not Brexit itself that looks frightening for local business, but uncertainty associated with it. Dire predictions of experts haven’t come true yet, moreover, the companies believe that they will show strong growth in the next three years. That’s how long the national authorities and the European Union representatives will be finalizing the rupture of relations within the single economic unit. According to KPMG’s study, Prime Minister Theresa May is expected to keep close economic ties with the European Union. Yet, nobody expects that this riddle will be solved in the near future. 

"The authorities need to be seriously concerned about departure of British business from the country, and they should find a common language with it as soon as possible to understand what guarantees the government can offer... To develop a backup plan is one of the forms of guarantee, but it should not become a "plan A". This is a radical step to transfer headquarters abroad, and it will certainly attract attention of media. However, a business may simply relocate part of its operations to other countries, especially without attracting public attention. We hear again and again that business needs certainty"- summed up Mr. Collins.

Meanwhile, Treasury Select Committee of the United Kingdom said that if the British financial services sector loses access to the single European market after Brexit, caused damage will be quite substantial.

The Committee’s Chairman Andrew Tyrie published a letter from Andrew Bailey, Executive Director of Financial Conduct Authority (FCA). He says that at the moment, 5,476 British financial services company have at least one corporate "passport" for doing business in other EU countries or the European Economic Area. According to the MP, the risk that the business will lose access to the single market is very substantial. To compare, only a little more than 8 thousand financial services companies from all over Europe will lose the similar right in respect to the United Kingdom.